Chainlink is the largest and earliest oracle system in the blockchain. There are two major misconceptions about oracles:

1. 1. An oracle is not a machine that can predict the future but refers to a blockchain database.


2. 2. The name 'Oracle' in the context of oracles has no relation to the company Oracle.

The primary reason for naming the blockchain database as Oracle is that blockchain is an application of data and cryptographic algorithms, which is significantly different from the more familiar SQL databases used by the public. In addition, oracles not only read and store data but also need to fetch data. This data is not written on the blockchain because the data that blockchain can store is very small (Caldarelli, 2020).

The first-generation blockchain technology is Bitcoin, and Bitcoin's blockchain only stores the ledger. The second-generation blockchain technology is Ethereum, and the Ethereum blockchain stores smart contracts. A simple explanation of smart contracts is that they are a set of standardized code that stores more diverse information than a ledger (Mühlberger, 2020).

However, this does not solve the problem of large real-world data, and because this data does not need to be frequently read, storing it on the blockchain would lead to oversized blocks and slow updates. The main function of the blockchain is decentralized transactions (Caldarelli, 2020).

Oracles are the solution to this problem, primarily driven by the rapid development of DeFi and RWA. When DeFi is rapidly developing, the data that needs to be read is not just the ledger and transaction records but also data such as the assets in users' wallets, data from miners, and more. It may even require reading data related to events like a sports match, user predictions for the score, and the actual final score (Beniiche, 2020).

So it is precisely because of oracles that Web 2 has upgraded to Web 3.

Chainlink Mining

Chainlink is the company that developed the first blockchain oracle, so it is a first-generation oracle technology and the largest in the oracle project. As a first-generation oracle, Chainlink is highly centralized. To accelerate data retrieval, Chainlink does not use mining but employs a POS (Proof of Stake) reward mechanism.

It is impossible for regular users to run a Chainlink node to process Chainlink data and receive rewards. Chainlink controls all nodes, and users can participate in Link staking to receive a 5% token reward.

This ensures that the quantity of Link tokens can be easily managed and controlled.

Link Token Circulation

The Link token is the token of the Chainlink Network, mainly used for paying staking rewards and gas fees when using data.

The total supply of Link tokens is 1 billion, and the current circulating supply of Link tokens on the Chain network is 419 million.

Chainlink's Risks

Because Chainlink is a centralized oracle, many users question the accuracy of its data. This issue has led to the rapid price increase of TRB, a competitor, in the short term.

Also, due to Chainlink's centralization, it can collaborate with Web 2 companies like Google and banks. Traditional companies find it easier to understand Web 2.